Originally Posted by
FXLAX
Just to play devil’s advocate, isn’t that full retirement check that is never missed due to that contract that was negotiated by those you don’t trust? In other words, if there was a loophole in that part of the contract, wouldn’t management already exploited it, like they have with first class seats?
Good question....my answer is long but please stick with me through it. The A Plan is essentially an annuity, which is a type of investment vehicle that's been around for about a century. An annuity is a close cousin of a life insurance policy in that the underpinnings of both are based on actuarial tables and simple math. Roughly speaking in simplistic terms, the formula goes like this:
If the objective is to produce $130k in payments in a given year (or $10,833.33 per month) for life, what lump sum must be used to purchase an annuity contract for an individual of a specific age (actuarial) to produce said payment.
It's a simple product. It's a tried and true, proven method for providing lifetime pensions that has been used successfully for a long, long time in virtually every industry. In other words, it's kinda hard to mess that one up. The reason the Company and the rest of corporate America have fought to do away with such pensions is because of this simplicity. That simplicity being the lump sum they must cough up to produce the contractually obligated monthly pension payments. And by cough up, I mean it is real money they must transfer to someone else. They cannot use accounting tricks to make this lump sum payment....again, it costs them real money, right now! They'd rather not have to do that...they'd rather use accounting tricks to avoid having to spend real money. Regulations that flowed out of the last round of massive government bailouts a dozen years ago allowed corporations much more flexibility (wiggle room) in accounting practices in the area of pension solvency except annuity-type pensions. Annuity-type pension funding requirements were actually tightened. Instantly, other, more creative types of pensions became the prettiest thing in the room.
Remember talk many years ago about privatizing Social Security? Opponents of that idea in Congress waged a fear campaign by claiming such a move would result in lost pensions and destitute seniors homeless and hungry on the streets because folks would be losing money in the stock market. This fear campaign hid the real reason for the opposition and that was the "privatization" wasn't really about putting your SS funds into the stock market, it was about how Congress funded the pensions. The privatization part would have meant that Congress could no longer use accounting tricks to fund today's pensions. It would mean they would have to use real money, not "accounting money" to fund each individual's pension, in their own name....that's what was meant by privatization. The fallout from that battle are the Social Security Benefit statements we now get each year showing how much SS pension we have coming to us. These statements are cleverly designed to look just like our other financial statements but the numbers they print are merely accounting tricks. You do not have a true individual account at Social Security. The accounting tricks used by Congress function exactly like a Ponzi scheme in fact. The SS deductions from your check don't go into "your account," instead they get redirected to someone drawing SS payments today.
Sorry for the long explanation but I think context is important here.
To address your question again. Our negotiators back then asked for a standard annuity pension and that's what we received. There's no wiggle room in that type of product. They didn't have to come up with any formulas beyond standard actuarial tables and a final salary plus years of service. Simple! They didn't have to negotiate floors or convert any money into shares of a fund and then re-convert them to real money. They didn't have to reconcile how the formula might change with LTD or any other contingency. It was simple....if we max out the plan, we get $130k per year for life.
The Company, understandably, is balking at improvements for the same reason certain members in Congress opposed SS reform and the same reason the rest of corporate America has coerced labor away from them....it costs them real money, right now.
If I owed money to someone and was given a choice, I'd much rather give a "promise" to pay them rather than actually pay them.
And if anyone thinks the PBG is our savior and will catch us if all else fails....just ask any of our brethren at Delta and United how that worked out for them....ask them how many pennies on the dollar they are receiving. I'm quite certain they would dispel any notion that our pension is fully insured.